Lecture Notes: Interview with John Gray, COO of Blackstone by Niklas Tangen

Introduction

• Speaker: Niklas Tangen, CEO of the Norwegian Southern Wealth Fund
• Guest: John Gray, COO of Blackstone
  • Formerly head of Blackstone's Real Estate division
  • Grew real estate holdings from $5 billion to over $300 billion
  • Known for significant deals, such as Hilton Hotels.

Reasons for Blackstone's Success

• Mission Focus: Delivering premium returns for customers
  • Private markets require higher returns than liquid markets
• Entrepreneurial Push: Expansion into new geographies and products
• People: Importance of team members in the investment business

Characteristics of a Good Business

• Large, growing market presence
• Competitive advantage/moat
• High-margin, capital-light, recurring revenue models
• Example: Hilton Hotels as a management and franchisor company

Investment Philosophy and Strategy

• Past and Present: The rigor of the investment process has remained
• Evolution: From classic value investing to high conviction areas
  • Focus on logistics, data centers, life sciences
• Investment Committee: Extensive review process for potential deals
  • John Gray sits on 10-12 committees, meeting weekly or bi-weekly
  • Emphasis on thorough memo reviews and discussions

Decision Making in Investments

• Balance between data-driven analysis and instinctual judgment
• Importance of management teams
• Pattern recognition as a key component of decision-making

Scale and Operations

• Blackstone's scale provides competitive advantage in private markets
• Scale Benefits: Access to information, resources, and capital solutions

Core Investment Areas

• Data Centers: High demand due to cloud migration and AI
• Avoided Sectors: Office buildings and shopping centers, though some reconsideration is occurring

Private Equity and Credit

• Shift from financial arbitrage to operational, growth-oriented investments
• Private credit: Direct lending provides higher returns by removing intermediary costs
• Expansion into private credit and increasing regulation considerations

Corporate Culture at Blackstone

• Small firm mentality despite growth
• Blackstone TV: Weekly communications to maintain culture and mission
• Key Traits: Drive, teamwork, emotional intelligence, and judgment

Personal Insights

• John Gray's passion for investing and curiosity
• Running globally and using LinkedIn as a platform for engagement

Advice for Young People

• Hard work, passion, and willingness to speak up
• Being an agent of change and lifelong learning

Conclusion

• John Gray emphasizes the importance of continued learning and passion in one's career